Panoptic Enterprises' FEDERAL CONTRACTS DISPATCH

AGENCIES: Department of Defense (DOD), General Services Administration (GSA), and National Aeronautics and Space Administration (NASA)

ACTION: Proposed Rule

SYNOPSIS: It is proposed that FAR Part 27, Patents, Data, and Copyrights, be amended to clarify, streamline, and update guidance in it, and clauses required by it, to provide a more logical presentation of this complex material.

SUPPLEMENTAL INFORMATION: This proposed rule constitutes a rewrite of FAR Part 27 and its associated clauses which implement a number of statutes and executive orders pertaining to patents, data, and copyrights. This effort was undertaken to make the various policies and procedures in FAR Part 27 more succinct and understandable. In addition to numerous editorial and structural changes, some existing policies and procedures have been clarified to eliminate potential confusion among responsible parties and make clearer the distinction between the rights and obligations of the contractor and the government. In addition, some substantive revisions have been made to reflect changes to the various laws covering the subject matter in FAR Part 27.

The following are some of the more significant changes contained in this proposed rule:

The prescriptions for the solicitation provisions and contract clauses are moved to discrete subsections, and an attempt has been made to eliminate language in FAR Part 27 that duplicates existing clause language in FAR 52.227.

A definition of "commercial computer software" is added to FAR 2.101, Definitions, because this term is referenced in both FAR Part 27 and FAR Part 12, Acquisition of Commercial Items ("any computer program, computer data base, or documentation that has been sold, leased, or licensed to the general public").

A unique definition of "United States" is added to proposed FAR 27.001, Definition ("the 50 States and the District of Columbia, U.S. territories and possessions, Puerto Rico, and the Northern Mariana Islands").

FAR Subpart 27.1, General, is rewritten to make it more succinct and to eliminate extraneous text. FAR 27.103, Policy, is deleted in its entirety because it merely states the policies concerning patents, copyrights, and data that are elsewhere in FAR Part 27.

FAR Subpart 27.2, Patents, is rewritten to better explain the purpose behind the use of FAR 52.227-1, Authorization and Consent, and its alternatives; FAR 52.227-2, Notice and Assistance Regarding Patent and Copyright Infringement; FAR 52.227-3, Patent Indemnity, and its alternatives; and FAR 52.227-6, Royalty Information. Related sections are grouped together under section headings to more accurately reflect the specific subject matter and guidance presented to the contracting officer (for example, the material in proposed FAR 27.201, Patent and Copyright Infringement Liability, is currently under FAR 27.201, Authorization and Consent, FAR 27.202, Notice and Assistance, and FAR 27.203, Patent Indemnification of Government by Contractor).

Much of the explanation in the current FAR 52.227-1 is considered extraneous and unnecessarily complicated since the clause is required in the vast majority of contracts and the exceptions to the use of the clause are clear.

The lengthy descriptions in FAR 27.203 for use of FAR 52.227-3 and its alternates are eliminated. Also, proposed FAR 27.201-2, Contract Clauses, makes the use of FAR 52.227-3 optional when simplified acquisition procedures are used.

In the proposed FAR 27.202-4, Refund of Royalties, the coverage on refund of royalties is consolidated to one sentence to eliminate confusion resulting from mixing prescriptive language and explanatory text ("the clause at [FAR] 52.227-9, Refund of Royalties, establishes procedures to pay the contractor royalties under the contract and recover royalties not paid by the contractor when the royalties were included in the contractor's fixed price").

The proposed FAR 27.203, Security Requirements for Patent Applications Containing Classified Subject Matter, replaces the current FAR 27.207, Classified Contracts. The change in title more accurately addresses any patent application that may include classified subject matter, regardless of the classification of the contract.

FAR Subpart 27.3, Patent Rights Under Government Contracts, is one of the more legally complex subparts in the FAR. This subpart primarily implements the Bayh-Dole Act (Title 35 U.S.C. Chapter 18), and the main concept behind the Bayh-Dole Act is to allow small businesses and nonprofits to commercialize subject inventions. The Bayh-Dole Act makes the Department of Commerce responsible for issuing regulations concerning its implementation. Therefore, any changes to the FAR must conform to the Department of Commerce's regulations in Title 37 of the Code of Federal Regulations, Part 401 (37 CFR Part 401).

Extraneous text in paragraph (b) of FAR 27.302, Policy, is eliminated to simply state that a contractor may elect to retain title to any subject invention (proposed paragraph (b)(1)). The rest of FAR 27.302(b) is restructured to emphasize that the government only acquires title to a subject invention in very limited circumstances.

Language previously located at FAR 27.304-3, Contracts for Construction Work or Architect-Engineer Services, is moved to proposed FAR 27.303(a)(2) for readability ("This section also applies to solicitations or contracts for construction work or architect-engineer services that include: (i) experimental, developmental, or research work; (ii) test and evaluation studies; or (iii) the design of a government facility that may involve novel structures, machines, products, materials, processes, or equipment (including construction equipment)).").

FAR 27.303(e) is reorganized to more clearly describe the implementation procedures of 37 CFR Part 401 that pertain to the exceptions in a contract with a small business concern or a nonprofit organization.

FAR 27.304, Procedures, is similarly reorganized for clarity as follows:

The procedures for a small business or nonprofit organization to appeal an agency's exercise of the exceptions at FAR 27.303(c)(1)(i) through (c)(1)(iv) to insert into the contract the clause at FAR 52.227-13, Patent Rights -- Acquisition by the Government, or of march-in rights are deleted in their entirety and replaced with a sentence referencing the Department of Commerce's regulations at 37 CFR Part 401. Since these procedures are copied verbatim from the Commerce regulations, they do not need to be repeated.

The additional requirements delineated in paragraph (e) of FAR 27.304-1, General, are deleted because they duplicate existing language at FAR 27.303(b)(2) and (c)(3). However, the language pertaining to the contractor's responsibility for delivering confirmation of the right of the contracting officer to inspect and make copies of the patent application file at FAR 27.304-1(e)(3) is retained and moved to FAR 27.305, Administration of Patent Rights Clauses.

In FAR 27.305, slightly different titles to the subsections are used to more accurately depict the subject matter: FAR 27.305-1, Goals; FAR 27.305-2, Administration by the Government; FAR 27.305-3, Securing Invention Rights Acquired by the Government; and FAR 27.305-4, Protection of Invention Disclosures. (EDITOR'S NOTE: Current FAR 27.305-2, Follow-Up by Contractor, would be deleted because it duplicates language contained in proposed FAR 52.227-11, Patent Rights -- Ownership by the Contractor, and the succeeding subsections would be redesignated accordingly.)

FAR Subpart 27.4, Rights in Data and Copyrights, is revised to provide clarity and to update information as follows:

In FAR 27.401, Definitions, a definition of "computer data base" is added ("a collection of data in a form capable of, and for the purpose of, being stored in, processed, and operated on by a computer. The term does not include computer software."). Also, the definition of "computer software" is changed to provide a more meaningful and accurate definition of the term. The definition of this term is derived from the definition in the Department of Energy Acquisition Regulation (DEAR) 927.409, Solicitation Provisions and Contract Clauses (the DEAR is Chapter 9 of CFR Title 48, and is available at http://professionals.pr.doe.gov/ma5/MA-5Web.nsf/Procurement/Acquisition+Regulation?OpenDocument). Finally, the definition of "technical data" is rewritten to comply with the definition of "technical data"' in 41 U.S.C. 403.

FAR 27.404, Basic Rights in Data, is subdivided into several subsections for better readability (FAR 27.404-1 Unlimited Rights Data; FAR 27.404-2, Limited Rights Data and Restricted Computer Software; FAR 27.404-3, Copyrighted Works; FAR 27.404-4, Contractor's Release, Publication, and Use of Data; FAR 27.404-5, Unauthorized, Omitted, or Incorrect Markings; and FAR 27.404-6, Inspection of Data at the Contractor's Facility). The material in FAR 27.404-2(c)(3) is rewritten to expressly state that computer databases must be treated as technical data and not computer software. This accurately reflects the law in this area.

The most significant changes in FAR Subpart 27.4 are in the proposed FAR 27.404-3. Currently, the coverage of copyrighted works in the FAR is premised on law that has long been changed (17 U.S.C. 401 and 402). Under existing law, an original work of authorship is copyrighted as soon as it is put in a tangible media (for example, by writing something down). Therefore, the use of the term, "establish" is inappropriate. Instead, the term "assert" is substituted to accurately reflect that a contractor already has a copyright in any data first produced under a contract. However, the use of the term "assert" gives the government the opportunity to provide permission before the contractor can act on its rights in the copyright, as is the current practice. Also, this section reflects the current practice of normally allowing contractors to assert their copyrights in data first produced under a contract.

Paragraph (c) of current FAR 27.405, Other Data Rights Provisions, which addresses contracts awarded under the Small Business Innovative Research (SBIR) Program, is deleted because it duplicates language in FAR 52.227-20, Rights in Data -- SBIR Program.

FAR Subpart 27.6, Foreign License and Technical Assistance Agreements, is redesignated as FAR Subpart 27.5, and it is reduced to a single sentence: "FAR 27.501, General. Agencies shall provide necessary policy and procedures regarding foreign technical assistance agreements and license agreements involving intellectual property, including avoiding unnecessary royalty charges." The remainder of the coverage of this subpart is addressed in the other subparts.

Clauses and provisions in FAR 52.227 are redrafted to reflect "plain language" changes that may substantially improve clarity. In addition, the following notable changes are made:

The title of FAR 52.227-11 is changed from "Patent Rights -- Retention by the Contractor (Short Form)" to "Patent Rights -- Ownership by the Contractor" because it provides a more accurate description of the clause content. Also, current FAR 52.227-11 is titled "Short Form" and FAR 52.227-12 is titled "Long Form." While FAR 52.227-11 may be a little shorter as it is currently written, it is still a sizable clause, so the distinction between short and long versions has never proved very helpful. In addition, since the Department of Defense is the only agency using FAR 52.227-12, it is deleted and will be moved to the Defense Federal Acquisition Regulation Supplement (DFARS).

FAR 52.227-11 is restructured to make clearer the distinction between the rights and obligations of the contractor and the government. In new paragraph (c)(3), a distinction of different types of patent applications had to be made (provisional and nonprovisional patent applications) to accurately reflect current practices at the United States Patent and Trademark Office. New paragraph (i) was substantially rewritten to eliminate the entire section on march-in rights (see discussion of proposed FAR 27.304 above), leaving only a reference to the provision of the Bayh-Dole Act that requires these rights.

Similar changes are made in the new paragraph (d)(2) of FAR 52.227-13, Patent Rights -- Ownership by the Government.

FAR 52.227-14, Rights in Data -- General, is revised to conform to the changes in FAR Part 27.